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Legal Featured Article

March 31, 2011

The Enemy of My Enemy Is My Friend: Microsoft Sides With EU Against Google

By Tracey E. Schelmetic, TMCnet Contributor

Though Google is no doubt relieved today at the end of one legal problem – the FTC (News - Alert) yesterday announced it has settled with the search giant over charges of violating user privacy with its Buzz social networking program, the company's lawyers are unlikely to get any rest in the near future.

While European Union authorities continue to look into whether Google (News - Alert) is unfairly squeezing out competition in the online search market, rival Microsoft is lending its support to the EU, wrote the Associated Press.

Microsoft's (News - Alert) General Counsel Brad Smith said the company is filing its own complaint against Google with the EU, citing concern over “a broadening pattern of conduct aimed at stopping anyone else from creating a competitive alternative.”

(This is somewhat ironic, given Microsoft's own embattled history with the EU, but we'll get to that later.)

A spokeswoman for the EU's Competition Commissioner, Joaquin Almunia, said the Commission has acknowledged Microsoft's complaint and will give Google the opportunity to tell its side of the story.

The EU Commission opened a formal investigation into Google's behavior in November of last year, following complaints from several smaller Web companies that the search giant was burying them in its results and engaging in other practices crafted to stifle competition.

Google, for its part, has expressed doubt about Microsoft's reasons for complaining and its involvement in the probe, since one of the original complainants, online-shopping site Ciao, is owned by Microsoft's search engine Bing. Another company involved in the case, U.K.-based price-comparison site Foundem, is a member of a Microsoft-sponsored technology trade organization.

Al Verney, a Brussels-based spokesman for Google, said the company wasn't surprised by Microsoft's move since one of their subsidiaries was one of the original complainants. “For our part, we continue to discuss the case with the European Commission and we're happy to explain to anyone how our business works,” said Verney.

Nevertheless, Microsoft's direct complaint adds weight to the case, since it lists several specific examples of alleged anticompetitive practices by Google involving some of the search engine's pet projects.

Smith claims that Google “put in place a growing number of technical measures to restrict competing search engines from properly accessing its YouTube (News - Alert) video-streaming site,” noted the AP.

“Without proper access to YouTube, Bing and other search engines cannot stand with Google on an equal footing in returning search results with links to YouTube videos and that, of course, drives more users away from competitors and to Google,” said Smith in a blog post.

Smith also said that Google blocked Microsoft's Windows Phones “from operating properly with YouTube,” but offers better services to its own Android (News - Alert) phones and iPhones, whose producer Apple, Inc., does not own a search engine.

With Bing, Microsoft is one of Google's biggest direct rivals. It also has a partnership deal with the other big search engine, Yahoo Inc.

Yet neither Bing nor Yahoo have come close to catching Google when it comes to search: Google processes two out of three online searches in the U.S. In Europe, Google controls more than 90 percent of the search market. Microsoft and Google also compete in other areas, such as cloud computing — where they offer remote server space and software processing to clients.

Central to Thursday's complaint is how Google's practices affect advertising — the main source of revenue for Web companies offering free services.

“Google has engaged in a broadening pattern of walling off access to content and data that competitors need to provide search results to consumers and to attract advertisers,” said Smith.

Microsoft claims Google is keeping some advertisers from accessing their own data and transferring it to rival advertising platforms, such as its own adCenter. That allegation echoes complaints by other companies and is part of the Commission's probe.

It's somewhat ironic that Microsoft is now legal friends with the European Union. The company spent years (decades?) fighting antitrust investigations there, and was forced to pay multi-billion Euro fines in settlements.

“Having spent more than a decade wearing the shoe on the other foot with the European Commission, the filing of a formal antitrust complaint is not something we take lightly,” said Smith.

If Google is ultimately found guilty of anticompetitive behavior it could be fined up to 10 percent of annual revenue, which reached some $29 billion last year.

Tracey Schelmetic is a contributing editor for TMCnet. To read more of Tracey's articles, please visit her columnist page.